If you are looking for insurance coverage, you may have heard that some agents can "bind" policies. Understanding this term will help you know which options you have available.
A binder is an oral or verbal agreement of coverage issued by an agent or insurance company before a policy has been officially issued.
A binder allows a customer to obtain insurance coverage without waiting for an insurance company to process the application and issue policy documents.
A binder benefits a customer by providing coverage quickly--coverage usually begins at 12:01 a.m. the day after the binder is issued. It also allows a customer to get insurance coverage without an immediate payment.
An insurance company may only grant an agent binding authority in certain circumstances. Binding rules vary from company to company.
A binder is only valid if the company accepts the applicant and the premium is paid by the agreed-upon date. If these conditions are not met, the binder is deemed void from inception, which means that no coverage ever existed.